9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2025 (2) TMI 140 - AT - Central Excise100% EOU - levy of Customs Duty on sale of capital goods by a 100% Export Oriented Unit (EOU) to an overseas buyer without physical removal from the EOU premises - deemed debonding or removal of goods or not - import of moulds from M/s. Ampa Industries in the year 2007 without payment of customs duties based on exemption contained in N/N. 52/2003-Cus dated 31.3.2003 - Extended period of Limitation - penalty. Whether the sale of capital goods being used within an EOU to TVS Indonesia without physical removal can be treated as deemed debonding / removal of the goods from the EOU on which duty has to be paid? - HELD THAT - The ownership of the capital goods is not a criterion to avail duty exemption on imports on the said goods. If the appellant could have imported the capital goods on loan basis and still enjoyed the concession there is nothing in the Customs Act or subordinate provisions which require him to pay duty just because he sold the capital goods to the buyer of his products without physically removing the goods from the Unit. Further sale would not amount to removal of goods / debonding unless such a provision is made in law. A deeming provision should be express and cannot be assumed. No such deeming provision has been alluded to by revenue in this case. In a normal situation it is the occurrence of the taxable event that creates or attracts the liability to tax. As held by the Hon ble Supreme court in the case of KIRAN SPINNING MILLS VERSUS COLLECTOR OF CUSTOMS 1999 (8) TMI 82 - SUPREME COURT the taxable event with respect to warehoused goods occurs when the goods are physically removed from the warehouse. This shows that ownership of the goods is irrelevant for an EOU to undertake its authorized operations. In JK. COTTON SPINNING AND WEAVING MILLS LTD. AND ANOTHER VERSUS UNION OF INDIA AND OTHERS 1987 (10) TMI 51 - SUPREME COURT the hon ble Apex Court held that there can be no doubt that the word removal contemplated shifting of a thing from one place to another. In other words it contemplates physical movement of goods from one place to another. In this case there is no shifting of the goods nor is there a deeming provision for sale or change of title to amount to removal accordingly sale of capital goods without physical removal from the EOU cannot be treated as deemed removal of the goods. The provision requires that goods imported duty free under the said Notification shall be removed from such bonded premises only after payment of duty. There has been no physical movement of goods outside he EOU and hence no removal / clearance of the impugned capital goods took place. This being so no duty was required to be paid. As per the legal position no demand survives. Extended period of Limitation - penalty - HELD THAT - The Central Excise authorities had duly verified and found correct the duty payable by the Appellant while exiting the EOU Scheme and a No Objection Certificate granted. Hence it is deemed that the department was aware of the transaction unless they had shown otherwise by way of fraud etc which is not the case here. Hence the extended period of limitation under Section 28(4) of Customs Act 1962 could not have been invoked nor can the goods be held liable for confiscation. No penalty could be imposed on the Appellant. Conclusion - i) The ownership of the capital goods is not a criterion to avail duty exemption on imports and sale would not amount to removal of goods / debonding unless such a provision is made in law. ii) There has been no physical movement of goods outside he EOU and hence no removal / clearance of the impugned capital goods took place. This being so no duty was required to be paid. As per the legal position no demand survives. iii) The appellant had exited the 100% EOU Scheme with proper authorization and verification by the Central Excise authorities negating any grounds for invoking the extended period of limitation or imposing penalties. The demand fails on merits and the impugned order is hence set aside - Appeal allowed.
ISSUES PRESENTED and CONSIDERED
The primary legal issue addressed in this judgment is whether the sale of capital goods by a 100% Export Oriented Unit (EOU) to an overseas buyer, without physical removal from the EOU premises, constitutes a "deemed debonding" or removal of goods, thereby necessitating the payment of customs duties. Additionally, the Tribunal considered whether the extended period of limitation for duty demand and penalties under the Customs Act, 1962, was applicable in this case. ISSUE-WISE DETAILED ANALYSIS Relevant Legal Framework and Precedents The legal framework centers around the Foreign Trade Policy (FTP) 2004-2009, particularly Para 6.2(b), which allows EOUs to import capital goods duty-free for export production. The Customs Notification No. 52/2003-Cus and its provisions regarding the removal and debonding of goods were also pivotal. Precedents from the Supreme Court, such as Kiran Spinning Mills v. CC and J.K. Cotton Spinning And Weaving Mills Ltd & Anr Vs Union Of India & Ors, were considered to interpret the concept of "removal" and "deemed debonding." Court's Interpretation and Reasoning The Tribunal emphasized that the FTP permits EOUs to import capital goods duty-free, provided they are used for export production. The ownership of these goods is not a determining factor for duty exemption. The Tribunal found no legal basis in the Customs Act or subordinate provisions requiring duty payment due to a change in ownership without physical removal. The Tribunal highlighted that a "deeming provision" for debonding or removal must be explicitly stated in law, which was absent in this case. Key Evidence and Findings The Tribunal noted that the appellant invoiced the moulds to TVS Indonesia and paid VAT, treating the transaction as an outright sale. However, the moulds remained within the appellant's factory premises. The Tribunal found no evidence of physical removal or any statutory provision deeming the sale as removal. Application of Law to Facts The Tribunal applied the legal principles from the FTP and relevant case law to determine that the sale of capital goods without physical removal does not constitute "deemed debonding." The Tribunal reasoned that the taxable event for warehoused goods occurs upon physical removal, as established in Kiran Spinning Mills v. CC. Therefore, no duty was payable as no removal occurred. Treatment of Competing Arguments The Tribunal addressed the revenue's argument that the sale amounted to debonding by highlighting the absence of any legal provision supporting this interpretation. The Tribunal also considered the appellant's compliance with the FTP and the Customs Notification, reinforcing that no duty was due absent physical removal. Conclusions The Tribunal concluded that the sale of capital goods within the EOU without physical removal does not trigger duty liability. The absence of physical removal meant no taxable event occurred, and thus, the demand for customs duties and penalties was unjustified. SIGNIFICANT HOLDINGS The Tribunal held that "ownership of the capital goods is not a criterion to avail duty exemption on imports," and "sale would not amount to removal of goods / debonding unless such a provision is made in law." The Tribunal reiterated that "a deeming provision should be express and cannot be assumed." Consequently, the demand for customs duties and penalties was invalidated. The Tribunal also noted that the appellant had exited the 100% EOU Scheme with proper authorization and verification by the Central Excise authorities, negating any grounds for invoking the extended period of limitation or imposing penalties. The final determination was that the demand failed on merits, and the impugned order was set aside. The appellant was deemed eligible for a consequential refund, if applicable, under the law.
|
